Student loans become election year battleground on federal front

Posted: May 6, 2012 - 6:31am

WASHINGTON (AP) — The Senate is the newest arena in the election-year face-off over federal student loans, and both sides are starting out by pounding away at each other.

With Congress returning from a weeklong spring recess, the Senate plans to vote Tuesday on whether to start debating a Democratic plan to keep college loan interest rates for 7.4 million students from doubling on July 1. The $6 billion measure would be paid for by collecting more Social Security and Medicare payroll taxes from high-earning owners of some privately held corporations.

Republicans want a vote on their own bill, which like the Democrats' would freeze today's 3.4 percent interest rates on subsidized Stafford loans for one more year. It would be financed by eliminating a preventive health program established by President Barack Obama's health care overhaul.

Each side scoffs that the other's proposal is unacceptable, and neither is expected to garner the votes needed to prevail. Even so, everyone expects a bipartisan deal before July 1 because no one wants students' interest rates to balloon before November's presidential and congressional elections.

"We're still pushing on that," said Rhode Island Sen. Jack Reed, chief sponsor of the Democratic bill. "But I also think I recognize if there is another proposal outside of going after the health care fund, we'll certainly listen."

Stafford loans are made to low- and middle-income students. With student loans of all types a growing household burden that now exceeds the nation's credit-card debt, the fight in Congress has come to symbolize how each party would help families cope with the rugged economy and how to pay for it.

Lawmakers face a pile of other issues this week as well.

On Tuesday, the House Judiciary Committee plans to vote on GOP-written legislation renewing federal efforts to prevent domestic violence. The Senate voted to renew the Violence Against Women Act two weeks ago and included provisions, such as requiring groups receiving money to show they don't discriminate against gays, that drew opposition from conservatives. The House version is expected to leave out such contentious language.

That same day, House-Senate bargainers plan to start talks on overhauling federal transportation programs. Congress is under pressure to act because the trust fund that pays for highway aid to states is forecast to go broke next year. Transportation programs have limped along under nine short-term extensions since the last long-term transportation bill expired in 2009, and the current one expires June 30.

The House Armed Services Committee plans Wednesday votes on a defense budget that may defy administration preferences to close more military bases and retire some of the Air Force's high-altitude Global Hawk drones.

The House also turns this week to a Republican measure cutting more than $300 billion from the federal budget over the coming decade. The cuts would prevent the Pentagon from getting smacked with a $55 billion cut in its budget next year, due to the failure of last year's deficit "supercommittee" to strike a debt-cutting deal. They would also preserve $24 billion for domestic agency budgets.

The GOP cuts hit programs for the poor such as food stamps and Medicaid, and also strike at Obama's revamping of health care and financial regulations. They'll be dead on arrival in the Democratic-controlled Senate.

The House also is set to vote on renewing the charter of the Export-Import Bank, the federal agency founded in 1934 that helps finance American companies' overseas sales. House leaders late Friday broke a political logjam that had been holding up the charter renewal, something usually accomplished with little or no controversy.

As for the student loan fight, it is chiefly an exercise each party is using to vilify the other to voters, as Obama illustrated Friday in remarks to a cheering crowd at a high school in Arlington, Va.

"We shouldn't have to choose between women having preventive health care and young people keeping their student loan rates low," he said, continuing a Democratic theme that the GOP doesn't care about women's issues.

This week's White House schedule underscored the president's willingness to use student loans as a blunt political instrument. He planned a Monday conference call on the subject with local officials and student leaders, Vice President Joe Biden was discussing it Thursday at the White House with students and others, and top administration officials were holding student loan events in at least nine states.

Republicans were giving as well as they got.

In a written statement, Senate Minority Mitch McConnell, R-Ky., said the student loan issue was a phony fight designed by Democrats as a distraction for young people who "can't find good jobs in the Obama economy." Others also called it a charade.

"It seems like once a week, they begin the week by turning the Senate into a political playpen for the presidential race," Sen. Lamar Alexander, R-Tenn., sponsor of the GOP student loan measure, said in an interview. He added, "I certainly don't support the idea of raising taxes on small business men and women at a time when we're trying to grow jobs."

On April 27, the House approved a student loan measure similar to the one by Senate Republicans. House leaders scheduled that vote soon after Mitt Romney, the likely GOP presidential nominee, built pressure on them by saying he favored extending the current loan interest rates.

If the loan rates rise to 6.8 percent on July 1, it would affect more than 7.4 million students expected to seek subsidized Stafford loans in the year running through June 2013. The Department of Education projects those students will borrow $31.6 billion, averaging $4,226 apiece.